A few weeks ago, we made some legal reflections on the detention of the vessel Grace 1 (now called Adrian Darya 1) which took place on July 4th in the waters of the Strait by the Government of Gibraltar in a joint operation with United Kingdom military forces. The Panamanian-flagged vessel, owned by a Singaporean shipping company, was allegedly transporting Iranian crude oil from Iran to a refinery on Syrian territory. The Gibraltarian authorities justified their action by claiming that they were applying European Union sanctions, arguing that the company owning the refinery to which the oil was allegedly destined (Baniyas Oil Refinery Company) is a subject sanctioned within the framework of the restrictive measures for the situation in Syria applied by the European Council.
At the time of the initial arrest and with limited information on the case, we anticipated that the action of the Gibraltar authorities was illegal both from the point of view of Public International Law and from the point of view of European Union Law. The former because the apprehension took place outside its sovereign waters, particularly if we consider what was agreed in the Treaty of Utrecht, which limits Gibraltar's maritime jurisdiction to the waters of its port. The latter being because European sanctions operate only within their scope of application and this case does not fall within that remit.
The European Union prohibits Europeans from importing oil and petroleum products from Syria and, simultaneously, it also prohibits Europeans from other operations (transport, insurance, etc.) related to such imports, but in this case we were not dealing with a sanctioned operation, but with a foreign transport of foreign crude oil to Syria.
At that time we also pointed out that the Government of Gibraltar would be acting at the request of the US authorities, which intended to make effective, with respect to the Grace 1 cargo, the extraterritorial sanctions (Secondary Sanctions) applied to the Iranian oil sector. This behavior is unacceptable from a legal point of view for several reasons: the first would be that these US restrictions were imposed following the unilateral break by the United States from the Joint Comprehensive Plan of Action (JCPOA). The JCPOA lifted sanctions on Iran in exchange for stopping its nuclear program. But, unlike the United States, the European Union and its Member States continue, for the time being, to consider that the JCPOA is still in force and that the obligations arising from it must be respected. The second reason would be that, by applying an American Secondary Sanction, the Gibraltarian authorities would be acting radically contrary to the provisions of the European Blockade Statute, contained in Regulation (EC) 2271/96 updated by Delegated Regulation (EU) 2018/1100 and Implementing Regulation (EU) 2018/1101. These are the Regulations that updated the European antidote rules and were issued specifically to deal with US secondary sanctions against Iran.
The Government of Gibraltar extended the detention of the vessel Grace 1 for 43 days, until 16 August, when it decided to release it, based on the hearing of the Supreme Court of Gibraltar, which denied the right to retain the vessel and its cargo due to the application of international sanctions.
The information that has become available over time, as well as the statements of the Government of Gibraltar since the detention, in particular the explanations given at the time of the release of the vessel, have confirmed what we stated in our initial analysis.
Thus, the release of the vessel Grace 1 has merely confirmed the numerous legal irregularities of considerable gravity surrounding its capture and retention. Although Gibraltar has finally had to release the vessel because its legal unsustainability, the situation has also served to expose the lack of reaction of the other Member States of the European Union, demonstrating that Europe is not acting either consistently or decisively in the face of secondary sanctions by the United States, with the consequent deterioration of the Rule of Law in Europe.
The release of the ship, however, has not put an end to the episode, on which a number of questions can be raised.
Could European nationals unload and import the oil transported by Grace 1 (Adrian Darya 1)?
As mentioned above, the Joint Comprehensive Plan of Action (JCPOA) signed with Iran in 2015 remains in force for all parties except the United States, which has withdrawn from the agreement and re-imposed sanctions. As the agreement is still in force for the European Union, nationals of European countries can trade Iranian crude oil since these operations are not subject to European sanctions.
Moreover, there are the aforementioned antidote rules in the European Blockade Statute, contained in Regulation (EC) 2271/96 updated by Delegated Regulation (EU) 2018/1100 and Implementing Regulation (EU) 2018/1101, dictated specifically to deal with secondary US sanctions against Iran. The Blockade Statute prohibits EU bodies from complying with US extraterritorial sanctions and allows for the possibility of claiming compensation for damages from bodies who cause such damages as a result of their application. It also provides that foreign court judgments imposed to enforce US sanctions will not be recognized in the EU. In other words, according to the legal system of the EU, a national of any member country could buy and import crude oil of Iranian origin, free of European sanctions and with the protection of the instruments deployed by the EU to this end.
However, after a year of updating, it can be said that the effectiveness of these rules in dealing with the strong US sanctions affecting fundamental economic sectors such as banking and finance, hydrocarbons and transport, has been very limited.
Can the United States seize the released vessel?
According to official statements, the Ministry of Justice of the Government of Gibraltar had received a request for Mutual Legal Assistance from the United States, requiring the restriction of Grace 1 and its cargo as a step towards the United States issuing seizure proceedings, all on the basis of unilateral sanctions imposed on Iran. Finally, following a pretrial hearing by the Territory's Supreme Court, the Government of Gibraltar responded to the United States by indicating that they could not grant the request. The main reason for the denial was that the offences alleged in the United States application would not constitute offences in Gibraltar, since there are no equivalent sanctions against Iran in Gibraltar, the United Kingdom or the rest of the EU. The current EU sanctions regime against Iran is fundamentally different from that in the United States.
In its rejection of the US request, the Government of Gibraltar has also noted that EU Regulation 2271/96 - and its updates - protects against the effects of extraterritorial application of legislation adopted by a third country, such as Secondary Sanctions, and specifically prohibits compliance with certain US laws, including Iran's Transactions and Sanctions Regulation ("ITSR"). This reflects the very different legal positions and regimes in the US and the EU.
The question remains as to whether the United States will give up executing the confiscation order already issued or try again. If its intention is to insist on confiscation, it will not be able to do so directly by using its own naval forces on the high seas without serious violation of one of the fundamental principles on which maritime traffic is founded, since under the United Nations Convention on the Law of the Sea (UNCLOS) international waters are free for navigation and no country can claim jurisdiction and competence over them. To execute the seizure, then, the United States would have to resort once again to the assistance of a coastal state, when the ship entered port. The chances of success of such a request would be conditioned by the assessment of the case made by the coastal State on aspects such as its own substantive law, the extraterritorial application of unilateral sanctions and bilateral treaties that oblige it vis-à-vis the United States (mutual legal assistance or similar), i.e. the result would depend on the legal circumstances of each State. Considering the Gibraltarian precedent, however, it is plausible to understand that no EU member would ever grant a request based on US sanctions against Iran.
Can Iran freely make use of the oil cargo, selling it to anyone who wants to buy it, including the Syrian refinery?
At the time of the arrest of the vessel, the Government of Gibraltar alleged that the crude oil cargo was destined for a refinery on Syrian territory, in violation of the restrictive measures in Syria sanctioned under Council Regulation (EU) No 36/2012 and Council Decision 2013/255/CFSP.
As we said, European sanctions only apply within the scope set by the European legislator and this is an operation completely outside that scope. There is therefore full legal freedom for Iran to make use of its cargo of crude oil, including exporting it to Syria.
Can ship-owners, ship-operators or charterers claim damages from Gibraltar and the United Kingdom?
Since the detention of the ship was without legal basis and the Government of Gibraltar itself has acknowledged this, the injured parties could claim damages from those who caused them, namely the Government of Gibraltar and the United Kingdom.
The detention of the ship as it passed through the Strait of Gibraltar was in violation of the regime laid down in European Union law and also in the United Nations Convention on the Law of the Sea (UNCLOS). Since Gibraltar, with the assistance of the United Kingdom, made an illegal detention, the ship-owner, its operators and the owner of the cargo, as injured parties, could claim the damages caused by the detention for 43 days in Gibraltarian port, including surcharges for port stay, labor costs, and liabilities to third parties such as the consignee of the cargo, among others.